Elanco Animal Health Incorporated (NYSE:ELAN) Q3 2023 Earnings Call Transcript

And as I noted in my comments, in our 18% of our global business is U.S. vet clinic. That will grow and we wanted to grow. It’s going to grow a lot next year with a — with our portfolio changing. But today, I would say that that sensitivity is back to what I’ve shared with Erin, it’s about the end. And so we also see prescriptions growing outside of the clinic as COVID and post-COVID people have gotten used to a lot more of drop shipping and you know, online purchases. So we want to win, you know, online and offline, in the vet, in retail overall. So, and I would point to our proof point, OUS Pet grew 16%, OUS Seresto Advantage grew double digit, e-commerce scripts are outpacing most every other channel, year-to-date para is meeting our expectations and — and year-to-date, you know, U.S. OTC is up 10%.

These are just proof points to say we’re a more resilient business, less sensitive to vet visits and we’re building a model that can play in both and again be a lot more durable going forward. And net-net our market is robust and durable even in these tougher economic times, shown by our results, but also by our competitors.

Chris Schott: Okay, great. And then just the follow-up was, I know you’ve talked about the expansion of the sales force. But if I look at next year and assuming everything stays on these timelines, you’re going to have several very important kind of blockbuster products launching in a short period of time. So, will you be in a position with these 70 additional reps you’re adding that you can basically manage multiple launches in parallel with each other or do we need to think about the organization prioritizing for example like derm over parasiticide if it can always get approved in second half of next year. You’ve got three big blockbusters all going — going out at once. Thank you.

Jeff Simmons: Yes. So, I would note that we’ve got parvo in front of us right now, and as supply ramps will focus there. That’s one of the reasons that we wanted to move up and — and take some of the expense of the sales force is preparing them. It does take time, if you think about it might be 25% more sales force, but it’ll impact 60%, 70% of all territories. So, getting that stability is key. But you’re right, focus on which products to — to detail and profile is very important and we’re going to — we’re going to focus on that. And look, pacing launches, we hope we have these problems. But again, we’re — we’re going to be very capable, we’ve been working on this and this launch muscle has been building way back Zorbium and other products back 18 months ago and it will be both not just sales force, but the digital and some of the other things that we’ve talked about.

And look, we’re in a rolling iterative process on these new products and we’ll be — we’ll be prepared as you know, as we’ve said upon approval there is administrative review, there’s labeling, there’s manufacturing. So there’ll be — there’ll be a pacing to that as well. So when we’ll will be ready and we’re going to launch with the resources we need with excellence and to be very, very competitive. So, good question. And we’re up for the challenge.

Todd Young: And the only thing I’d add, Chris. The Bovaer launch will be on our Farm Animal side that teams independent of the pet side. And as you’ve seen on the work on the sustainability, this is all coming together nicely with a number of incentives from the inflation reduction act being set up to provide two farmers as well as credits being sold to customers. So we’re really excited about how sustainability is progressing. And as I said, that will be independent of the pet side of the business.

Chris Schott: Right. Thanks so much.

Operator: Your next question comes from the line of Umer Raffat from Evercore ISI. Please go ahead.

Umer Raffat: Hi, guys. Thanks for taking my question. I’m curious if you think the broad spectrum trio market is approaching some sort of peak penetration and I ask because we’re seeing some of the trends for Merck’s per vector, Zoetis is hinting at some softness in 4Q, partially because the year-over-year comps, but it does look like — I’m just curious how you’re — how you’re seeing that. The other thing, also is Zoetis believes that since a meaningful volume for them is driven by auto ship via retail, there will be very low switch in that category. So I’m just curious how you’re approaching the broad spectrum parasiticide launch into next year.

Jeff Simmons: Umer, it’s a great question. Look, if you step back, the market continues to grow, compliance rates are still low and I think compliance will be key, and it will tie to the online. I mean consumers today at every segment want more convenience. They want things delivered to their door and we’re going to be capable as capable as any company there, given — given our capabilities. But I think it comes back, Umer, to probably the whole new versus legacy, you see share being taken from legacy, you see the pie getting bigger because of compliance, you see a lot of us spending a lot more time on brand awareness. That’s why it’s Credelio Quattro, it’s differentiation, but our investment is leaning against a Credelio just like the other competitors have done.

And so I think it’s these dynamics, but if you look at the fundamentals there’s always going to be quarter-to-quarter competitive shift between products that maybe that highlights to some of the things you’re noting but we — we are meeting our expectations, we’ve got an existing portfolio that’s very competitive and we believe we’ve got one of the most differentiated assets coming as we launch Credelio Quattro.

Umer Raffat: Thank you. And Jeff, may I just clarify, I know Zoetis is talking a lot about their promotional spend as one of the things they are deploying, how much are you guys planning for ’24. I know you talked about sales force expansion.

Jeff Simmons: Yes. Thank you for that question. We haven’t noted how much and will of course put more color to this as we head to our February earnings call in our guidance. But I do think I didn’t — I didn’t finish my thought last time as you’ve got the fixed sales force that’s locked in and done. And then the promotional spend will be material relative to what we see, what we see in differentiation and the potential as we’re coming up on that day one of launch and that could be a lot more time based to the launch and also relative to what we see in the marketplace. So we will spend what is necessary to take the share and to get ramp rates and why I spent time in my comments on the commentary to commercial capabilities to be able to increase faster, 28% faster, the speed to adoption of our product is the second metric, share voice, speed to adoption and then promotion.

And that promotion dollars will be material, but that will be more time base to the launch timing relative to our approvals.

Umer Raffat: Thank you.